Marriage means charting new financial waters
Compromise, planning, are keys to a successful voyage
By Mary Novak
If you are newly married, or getting married in the near future, you will soon discover, if you haven't already, that deciding how to manage your finances together is a major challenge. With dual incomes, dual checkbooks, dual credit cards and, many times, dual student loans, household budgeting can become a nightmare. Your income becomes our income.
Compromise is the key. You will come together with different ideas about money and how you can spend it. Listen to your spouse's ideas and consider all of your needs and some of your wants. The key is matching the amount of money coming in, with the amount of money going out. If you spend more than is coming in, you will begin to accumulate debt. The more debt you accumulate, the less spendable income you will have.
There are many ways to deal with all of this. I will look at it with the following in mind: "How can we manage our finances, pay our monthly bills, and not create more debt than is absolutely necessary?"
There are three important areas to look at as you make your married spending plan:
First, you will need to figure out exactly how much spendable income you have together.
Next, look at what outstanding debts you have.
Last, but probably most important, what kind of monthly expenses do you have?
Let's talk about each of these areas individually.
First, look at spendable income. You will want to figure out how much income you will have to work with each month. If you have a 401k and medical flex plans, decide how much you want to contribute. Be cautious. You can always increase those amounts the next year.
I often encounter clients who are saving the maximum in a 401k because the employer matches a certain percentage. It is a wonderful benefit, but if you are saving so much that you don't have enough left to live on, it can be a problem. You don't want to be creating debt each month because you save too much. If you can afford the maximum, go for it. The more you save, at a younger age, the more time it has to grow into something substantial for retirement.
Next you will want to make a list of all of your outstanding debts, other than car and mortgages. List each debt, the balance you owe, and the monthly payment and interest rate. The sooner you pay off these debts, the more spendable income you will have. If you continue to make the same payments, even though the amount requested drops, as credit cards will, you will begin to make headway on paying off your debts. If you pay off debt, you will have more spendable income.
Now we come to the difficult part: listing your monthly expenses. Some are fixed, such as rent or mortgage and car payments. Some of you will have to go back a few months and take an average to see what they cost monthly, such as heat, phone and cable.
You may have bills that come quarterly, such as car insurance or the water bill. Divide these by three to see how much you need to save each month so you're prepared when they come. Anything that you can put on a budget plan helps.
Food, entertainment, gas, donations and miscellaneous items also need to be figured in. Consider using cash for these items. If you intend to stay out of debt, you will want to consider how much you want to save each month for clothes, gifts, vacations, subscriptions, medical expenses, household needs (appliances, furniture, repairs) and car repairs. If there is also enough to begin saving for a home or your next car, you are doing great.
Again, the key is to match the amount of money coming in, with the amount of money going out. If you are having a difficult time putting a plan together, seek help.
There are budget counselors available through diocesan Catholic Charities in Green Bay, Menasha, Oshkosh, Manitowoc, New London and Sturgeon Bay. For more information, call Catholic Charities, toll-free, at 1-877-500-3580, ext. 8234.
(Novak is a consumer credit counselor with Catholic Charities, Green Bay.)